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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (12438)	6/26/2009 7:29:02 PM
From: Hawkmoon	2 Recommendations Respond to of 33421

I refer to the mass of unuitilized reserves which FED created last year. Listen.. all I know is what I hear and see.. The largest majority of my extended family is either involved in construction or farming. They've had TWO building permits issued this month in the neighboring town of around 40K, which is about 90% LOWER than last year. And the construction that is occurring is being done at literally NO PROFIT on the part of the contractors. They're doing it because it's better than unemployment. The local GM dealership is also having a very tough time of it. People are just fixing their current vehicles rather than going into debt to buy a new one. Now if you think nearly 10% unemployment represents "potential demand" then I guess I need to see the economics book your drawing your thoughts from. Maybe it's from some European source where they all think that 10-20% unemployment is normal... seekingalpha.com And Fed Reserves, or money available to be lent to borrowers is NOT DEMAND. And sure.. there is a lot of cash on the sidelines, but I would dare say it's not owned by those who are currently, or expected to be, unemployed. That's money waiting to be lent out for higher yield, not money waiting to be spent on consumer goods by the broadest segment of our society. Those people are shopping at Walmart and Target, or the Dollar stores because they need to pinch every penny they can. Btw, if you don't think we're in deflation, then you should share your opinion with Martin Weiss: We witnessed one of the biggest collapses of all time in “open market paper” — mostly short-term credit provided to finance mortgages, auto loans, and other businesses. Instead of growing as it had in almost every prior quarter in history, it collapsed at the annual rate of $662.5 billion. (See line 2.) Banks lending went into the toilet. Even in the fourth quarter, when the meltdown struck, banks were still growing their loan portfolios at an annual pace of $839.7 billion. But in the first quarter, they did far more than just cut back on new lending. They actually took in loan repayments (or called in existing loans) at a much faster pace than they extended new ones! They literally pulled out of the credit markets at the astonishing pace of $856.4 billion per year, their biggest cutback of all time (line 7). Meanwhile, nonbank lenders (line 8) pulled out at the annual rate of $468 billion, also the worst on record. Mortgage lenders (line 9) pulled out for a third straight month. (Their worst on record was in the prior quarter.) And consumers (line 10) were shoved out of the market for credit at the annual pace of $90.7 billion, the worst on record. The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1,442.8 billion of the credit available — and leaving LESS than nothing for the private sector as a whole. moneyandmarkets.com See that? The US government pledged our future tax revenues to repaying debt borrowed from private banks. Why? Because there few, if any PRIVATE BORROWERS willing to take out loans on assets that are at risk of DEPRECIATING and offer minimal to no ROI. That's 1.4 TRILLION in private lending that has not occurred because of lack of either lack of demand, or inability to qualify for, credit. So the banks lend to the Treasury, who then deploys the money the way it sees fit. And if the government doesn't deploy that capital in a manner in which it increase US productivity and competitiveness, then it's just money that our children will have to pay back down the road. And you want to know one of the major factors, IMO, that prevents private lending? The destruction of the financial surety and insurance sector. AIG, MBIA, ABK, RDN, AGO,.. etc.. Thus, I am finding myself more and more in Mish's camp on deflation: 2.bp.blogspot.com Hyperinflation, or even strong inflation predictions in the near term look rather silly in the face of this data unless one is only looking at the printing and not the destruction in credit..... ....Think consumers are about to go on a spending spree after a massive $13.87 trillion collapse in net worth? Think banks are going to start lending with this employment picture and household debt? I don't and boomer demographics makes the situation even worse. Don't forget the bleak employment picture. There is no source of jobs. Those who get hyperinflation out of this picture must be reading the playbook in Bizarro World because it sure is not the playbook here. globaleconomicanalysis.blogspot.com Hawk